Category: The Chief Economist’s Note

Concerns that one legacy of the pandemic will be a period of higher inflation are starting to spread. According to Eurostat, HICP inflation in the euro-zone jumped from -0.3% in December to +0.9% y/y in January. Core inflation increased from 0.2% y/y to 1.4% y/y – by far the largest monthly rise on record. In … Continue reading “Inflation’s revival more likely to be an American than a European story”

The past week has seen Joe Biden’s fiscal strategy come under fire from the most unlikely of places: it has caused a high-profile rift between Democrat-aligned US economists, setting the stage for a wider debate about the role of government in the post-pandemic recovery.   There are several strands to the argument, but the core of … Continue reading “US stimulus debate highlights the global risks of diverging fiscal policy paths”

Last week we launched a new service: ‘The Long Run’. This looks beyond our normal forecast horizon of one to two years ahead and analyses the issues that will shape economic prospects and financial market outcomes over the second half of this decade and beyond. You can find more details here. Most long-term forecasts rely … Continue reading “Economic legacy of the pandemic will be different from previous crises”

The pandemic has already forced economic forecasters out of their comfort zone, but the terrain is now getting even more perilous. It is no longer sufficient to make an assumption about “the virus”. We now have to consider: vaccine rollout, vaccine efficacy, virus mutations, the lifting of lockdowns and the increasing likelihood that some restrictions … Continue reading “The pandemic is distorting everything – including the economic data”

Last week I argued that, although inflation in advanced economies is likely to rebound this year, this should not be mistaken for the start of a new post-pandemic era of higher inflation. However, this is clearly not the same as saying there will not be a period of higher inflation in some economies at some … Continue reading “An inflation revival won’t look like the 1970s”

Last week we published our latest Global Economic Outlook. Two themes stand out. The first, as I have discussed before, is that we expect the recovery in global output over the next couple of years to be significantly stronger than most anticipate. The second is that we anticipate a relatively sharp rebound in inflation in … Continue reading “Beware the inflation head-fake”

We have published several pieces over the past week that shed some light on the thorny question of whether a bubble has inflated in asset markets. You can read the detail here, but several points emerge that are worth reflecting upon.  The first is that evidence of speculative excess in some markets does not imply … Continue reading “Rational exuberance – for now”

In my final note of 2020, I made the case for expecting a strong rebound in most economies this year. That inevitably led to questions about what might derail our above-consensus forecasts – and those questions have come into sharper focus following the recent surge in virus cases in the UK, and the extension of … Continue reading “Risks to economic recovery this year are all about pandemic fight”

Last week we launched a new product: Capital Calls. The idea is to bring together our highest conviction macro calls and, crucially, flesh out their market implications. These will be included as part of our service to all clients and will be continuously refreshed and updated.  I don’t intend to repeat everything that is in … Continue reading “What to expect in 2021”

The outlook for next year has brightened following the recent news on vaccines, and thoughts are starting to turn to the economic legacy of COVID-19. A key aspect of this relates to the fiscal consequences of the pandemic. This took centre stage last week in the UK as the announcement of the government’s spending review … Continue reading “Fiscal planning requires clearer thinking”